In Judge Sarah Sharer Curley's nearly three decades presiding over bankruptcy cases, some were especially painful to witness, she said — such as the 73-year-old woman who stood before her in 2012 with a student loan balance of more than $584,000.

The debt dated back to the 1970s and had grown throughout the woman's public sector career, Curley writes in her new book, " The Price of Forgiveness: Debt, Bankruptcy, and the Future of Fairness in America " She had "never made a lot of money," Curley said, and by the time she sought debt relief, the woman was living in poverty, with Social Security as her only income. Even so, strict bankruptcy laws can make it nearly impossible to discharge student loans Curley, the first woman appointed to the U.S. Bankruptcy Court for the District of Arizona, said it was a familiar story. "We allow the financial markets to take innumerable risks, yet we refuse to allow an individual to be forgiven for choosing to pursue an advanced degree," Curley wrote. CNBC's No. 1 financial advisor takes a family-office approach Trump Accounts hit 70 million enrolled and can now accept stock donations Thousands of homeowners face ARM resets — and much higher payments Social Security Administration announces 3.6% cost-of-living adjustment for 2027 CNBC's Financial Advisor 100: Best financial advisors, top firms for 2026 ranked CNBC Elite Advisors: Top ultra-high net worth wealth management firms for 2026 Curley retired in 2014.

CNBC spoke with her this month about her new book, in which she describes a legal system that often fails to give indebted Americans the second chance it promises. In 2025, more than half a million personal bankruptcy cases were filed — an almost 50% rise from three years prior, according to the Administrative Office of the U.S. Courts.

The interview has been edited and condensed for clarity. 'People are subject to many unexpected events' Annie Nova: What do people get most wrong about those who file for bankruptcy? Sarah Sharer Curley: People assume that individuals who file for bankruptcy are committing fraud, trying to hide assets and cheating creditors.

Nothing could be further from the truth. AN: And so why did people end up in your court? People are subject to many unexpected events.

People can't always plan adequately for the next earthquake, hurricane or natural disaster. But usually, it's someone losing a job. It could also be an illness that becomes chronic with medical costs that increase dramatically over a short period. Student loans is another area of concern.

Universities are charging more for basic degrees, as well as graduate programs. The cost of medical school over four years can be more than $400,000. AN: You write that many people who file for bankruptcy are not unemployed; they're just living paycheck to paycheck.

What does this tell us about our economy and labor market? Despite the increase in wages that most economists tout, many people are working as independent contractors.

They receive few benefits and have few rights. The company is not responsible to them. Other individuals may be working for a company but find the wages or benefits are insufficient.

Many people are forced to work for several employers to meet their needs on a weekly basis. Although unemployment may be low, the quality of the employment is also low. 'I found her credible' AN: The story in your book about the woman in her 70s with the six-figure federal student loan balance really stood out to me. What happened in her case?

The federal government would not agree to any settlement. I was the one who would have to decide whether her debt would be discharged or not. But the case law I had to follow was not in favor of discharging student loan debts. So, I didn't have a lot of flexibility in granting her relief.

However, I gave her credit for seven years of public service helping out troubled teens in San Diego County, since people who are in certain types of public service only have a 10-year repayment period. That meant that she'd need to repay the debt for just three more years. AN: Wow. Why wouldn't the federal government agree to any settlement with her?

The federal government retains law firms to represent it in bankruptcy court, allowing the law firms to have a certain amount of discretion as to how to proceed. As a result, some law firms are aggressive in the positions that they take.

In the case of the woman in her 70s, the law firm attorneys didn't believe her when she said she had no assets and was on Social Security. But the law firm did not do an adequate investigation. I found her credible.

'Harder to reach a settlement' on student loans AN: Under President Joe Biden's administration, it reportedly became easier for federal student loan holders to get their debt discharged in bankruptcy. What's the current situation like?

There were attempts by the U.S. Department of Education to work out repayment plans for student loan borrowers who could not repay their debts. There was also the possibility that the Education Department would agree to forgive at least a portion of the student loans.

However, once the Education Department was gutted in 2025, there were few, if any, employees who could approve the debt modifications through one of the offered programs. As a result, it has become harder to reach a settlement with the Department of Education.

AN: In your book, you describe President Donald Trump's "big beautiful bill," which passed in July 2025, as an "attack" on student loan borrowers. How so? Do you expect the new law to drive up bankruptcy filings?

The bill created unrealistic federal loan caps for students. As a result, if a student takes out a loan from a private financial institution that's not federally guaranteed, that loan will often be provided at a higher interest rate.

Let's say the student needs a $300,000 loan to go to medical school. If the individual has a lower credit score, their interest rate may jump to 16%, leading to a payment of $5,017 per month over 10 years, or $302,040 in interest.

These expenses are not sustainable for most individuals. The rate of bankruptcy filings will most likely increase.

Many bankruptcy filers 'feel they have failed' AN: You write that medical debt is another major reason people need to file for bankruptcy. Can you say a little more about this?

There were many individuals who appeared before me who had chronic illnesses. Chronic diseases are a problem because the person can only discharge the debt they owe at the beginning of the bankruptcy case. As with any chronic illness, the debt continues to mount day by day for years to come. Many individuals are traumatized when they file a bankruptcy case.

Former U.S. Bankruptcy Court judge AN: You write that the bankruptcy process is "tortuous" for most individuals. How so?

Dramatic changes were made to the bankruptcy law in 2005. People are required to jump through many hoops to get relief now.

There was no evidence to support certain beliefs that individuals were engaged in fraud or filing bankruptcy cases every few months. But the creditor lobby pushed to make the bankruptcy law more pro-creditor. The many forms that need to be filled out and the hearings that need to be attended usually keep the individual in a perpetual state of stress. AN: How does filing for bankruptcy affect people emotionally?

Many individuals are traumatized when they file a bankruptcy case. They had believed if they just work harder, they could solve their debt problems. However, when they're about to lose their homes, their cars or their businesses, they turn to bankruptcy.

Many see their inability to solve their financial problems as a moral failure. They feel they have failed. AN: What was it like for you, day after day, seeing people under the pressure of insurmountable debt?

At times, at the end of the hearing, after I had rendered my decision, I would let the individual know that under the current law, I couldn't provide them with what they really needed. I told them that the law needed to be changed. We give a break to large financial institutions and corporations, and it's time that we do so for individuals, too.